Skilled and Programmed agree on merger driving significant earnings accretion

Skilled (SKE) and Programmed (PRG) have this morning agreed to a merger on enhanced terms to those previously contemplated when PRG first approached SKE at the beginning of 2015. As we stated in our OC Funds May Newsletter, we believed both parties were highly motivated to agree terms in combining two of Australia’s largest labour hire groups in order to increase scale and realise significant cost synergies. The revised, agreed deal is predominantly funded by PRG scrip and has been struck at a significant premium to the prevailing SKE share price (+16%). It now also includes a 25 cents per share fully franked dividend which some investors (eg super funds) will find particularly attractive. The initial assessment of combined group synergies ($20m pre tax in the first year post implementation and upto $35m within 3 years) drives significant earnings per share accretion and we believe both shareholders will stand to benefit from this deal in the coming years.